Tax Filing Guide for S Corp, C Corp and LLC

Picking the right business structure is a big deal, and taxes are a huge part of that decision. In this article, we’re breaking down the tax filing side of things for C Corps, S Corps, and LLCs, so freelancers and business owners can get a handle on the forms and deadlines for each. If you’re looking for a broader comparison, Choosing the Best Business Structure for Freelancers is a solid starting point!  The article was last updated as of 4 March 2025. Keep in mind that tax rules and limits can change, so be sure to watch out for updates or consult a tax professional for the latest information.  Table of Contents Brief Highlights: Comparing C Corp, S Corp and LLC Here’s a quick rundown of the three business structures to give you the big picture. In the next sections, we’ll break down the details of tax treatment and the specific forms you’ll need to know. It’ll all come together as we go.  Category  S Corporation (S Corp)  C Corporation (C Corp)  Limited Liability Company (LLC)  Tax Forms  – Form 1120-S– Shareholders file Schedule K-1 on personal returns  – Form 1120 – Shareholders report dividends on personal returns  Depends on tax classification. See LLC section.  Filing Deadlines  March 15 2025*; extensions available  April 15 2025*; extensions available  Depends on tax classification. See LLC section.  State Taxes  Varies; some states do not recognize S Corp status Subject to state corporate income taxes  Subject to state taxes depending on classification  Eligibility Requirements  – Must be a domestic business– Up to 100 shareholders – Individuals only  – No limit on shareholders– Can include foreign and corporate owners  – No ownership restrictions – Flexible member structure  Ownership Restrictions  – Max 100 shareholders– One class of stock– U.S. citizens/residents only  – Unlimited shareholders– Can issue multiple stock classes  – No restrictions– Members can be individuals, corporations, or foreign entities  Compliance Requirements  – Annual meetings– Shareholder voting– File annual reports  – Annual meetings– Corporate governance– Strict record-keeping  – Varies by state– Fewer formalities than corporations  Average Formation Costs#  ~$1,200  ~$633  ~$50-$500 depending on state  Fundraising Ability  – Limited– Cannot issue preferred stock  – High– Can issue both common and preferred stock  Limited unless electing C Corp tax treatment  Dividend Taxation  Distributions taxed once at shareholder level  Dividends taxed twice (corporate and shareholder level)  Not applicable unless taxed as C Corp  Payroll Tax Implications  Must pay reasonable salary to shareholder-employees  Corporate officers are employees subject to payroll taxes  Members typically pay self-employment tax unless S Corp election made  Passive Income Limits (such as rent, interest, or certain royalties)  Passive income limited to 25% of gross receipts  No passive income limitations  No passive income restrictions  Liability Protection  Protects shareholders’ personal assets  Protects shareholders’ personal assets  Protects members’ personal assets  Conversion Flexibility  Can convert to C Corp; changing to LLC requires dissolution  Can convert to S Corp or LLC with filings and approvals  Can elect S Corp/C Corp taxation; conversions depend on state rules  Foreign Ownership  Not allowed  Allowed  Allowed  Administrative Burden  Higher than LLC; less than C Corp  High due to strict governance requirements  Low; fewer formalities required  Key Tax Advantages  – Avoids double taxation– QBI deduction available  – Potential for certain deductions not available to pass-through entities– Can deduct health insurance premiums for employees  – Flexible tax treatment (can choose to be taxed as a partnership, S corp, or C corp)– Simpler tax compliance than C-corp if taxed as a partnership  Key Tax Disadvantages  – Reasonable salary requirement– Limitations on QBI deduction for certain businesses  – Double taxation– More complex tax compliance  – Members subject to self-employment tax (unless taxed as C-corp)– Less established than C-corps in some states  Best For  Small businesses seeking tax savings through pass-through taxation  Larger businesses seeking growth through investment and stock issuance  Startups, freelancers, or small businesses needing flexibility  * For calendar-year corporations, Form 1120 is due on April 15, and Form 1120-S is due on March 15. For fiscal-year corporations, the deadline is the 15th day of the fourth month (1120) or third month (1120-S) after the fiscal year ends. # Formation costs vary by state and the scope of professional services.  S Corporations Tax Filing S corps offer a unique tax structure, blending the legal benefits of a corporation with the tax advantages of a partnership. This pass-through taxation model avoids the double taxation burden of C corporations, making it an attractive option for many small businesses.   Pass-Through Taxation One of the most significant advantages of an S corporation is its pass-through taxation model. Unlike C corporations, which are subject to double taxation (taxed at both the corporate and shareholder levels), S corps do not pay federal income tax at the corporate level. Instead, the corporation’s profits and losses are passed through to the shareholders, who report them on their individual tax returns (Form 1040). This structure avoids the double taxation burden and can result in significant tax savings for business owners.  Form 1120-S Form 1120-S, the U.S. Income Tax Return for an S Corporation, is the primary form S corps use to report income, deductions, gains, and losses to the IRS. It ensures the corporation’s financial activity is accurately reported and provides shareholders with the information needed to complete their individual tax returns.  The form is due by March 15th for calendar-year taxpayers (or the 15th day of the third month after the fiscal year ends). If additional time is needed to prepare the return, S corps can request an extension using Form 7004, which grants an automatic six-month extension. However, it’s important to note that an extension to file does not extend the deadline for paying any taxes owed. Estimated tax payments must still be made by the original due date to avoid penalties and interest.  Schedule K-1 Schedule K-1 details each shareholder’s individual share of the corporation’s income, deductions, credits, and other tax items. Shareholders use this information to complete their individual Form 1040.  W-2 Salary, Distributions, and Form 1040 (The Owner’s Perspective) If you own and work for an S corp, you must